London. From tiny frontier markets to the world's No. 2 economy, a range of developing countries could experience serious stress next year if a strengthening dollar and sluggish domestic economies make it harder to meet debt repayments.
Emerging governments and companies must repay more than $300 billion next year in hard currency debt, roughly a third more than 2016 – the result of a borrowing spree after 2008 when Western interest rates collapsed.
"One consequence of the very loose global monetary policy we've had for the past decade is that financing was easily available and went in some cases to corners of the market that didn't really deserve it," said Graham Stock, head of EM sovereign research at asset manager BlueBay.
Meanwhile, the dollar's five-year rally, renewed by Donald Trump's US election victory, will extend into 2017, Reuters polls show.
Following is a list of potential pressure points in emerging markets for 2017, in order of the size of their economy:
China – Chinese companies owe some $18 trillion (about 170 percent of gross domestic product), with close to $800 billion billion) maturing in 2017. Since 2014 Beijing has allowed 85 defaults and domestic ratings firm Chengxin predicts more in 2017.
Beijing may allow the yuan, already near 8-1/2-year lows, to fall further to stop burning through central bank reserves, which are at the lowest since 2010. That may prove a problem for companies with hard currency borrowings. Non-financial firms face $530 billion in external debt repayments in the next 12 months, the Institute for International Finance (IIF) estimates.
"If I had to make a bet for 2017 I would be much more concerned about China. [Financial sector deterioration] is speeding up," said Francois Savary, chief investment officer of Prime Partners in Geneva. "China could be a major risk for 2017."
Turkey – The lira's slump to record lows raises fears that companies may struggle to repay external debt, with non-financial firms owing $79 billion in the next 12 months, according to the IIF. The economy's first quarterly contraction since 2009 also possibly heralds a rise in bad bank loans; other weaknesses are low reserves compared with short-term debt and a current account gap around 5 percent.
JPMorgan noted that while Turkish companies had always successfully rolled over debts, the "dangerously high" current account deficit meant "investors will remain alert to the risk of a sudden stop in capital flows."
Venezuela – The government and state oil firm PDVSA have resolutely serviced debt, though the company recently swapped $2.8 billion in bonds and resorted to a grace period for a coupon on 2035 bonds. Brokerage Exotix calculates that about $10 billion is due next year in bonds, loans and interest but expects the country to muddle through 2017. However, with food shortages and triple-digit inflation it is unclear how long the government can cling to power. BlueBay's Stock said he had cut his overweight position: "We think we are getting closer to the end of the road for these payments."
Mozambique – Is set to miss a $60 million coupon due in January on its $727 million "tuna bond" which it wants to restructure so it can get a loan deal with the IMF. Creditors refuse to negotiate until an audit reveals how much Mozambique owes and to whom. Around $1 billion in state-guaranteed loans is also owed by two state firms, borrowings that had not been previously disclosed to bondholders.
Republic of Congo – Delayed paying coupons on its 2029 dollar bond in June and last December and Fitch noted "repeated arrears on other bilateral commitments." Republic of Congo blamed technical problems but investors want to see if an end-December coupon is on time. Moody's has highlighted "liquidity risk" and said raising financing in future would be "challenging." Exotix said the fiscal deficit was approaching 20 percent of GDP and advised selling the bond.
Mongolia – The resource-rich country's economic boom is over, but $1 billion in bonds mature between March 2017 and January 2018. Hong Kong-listed Mongolian Mining Corp is already in default. Investors hope the cash-strapped country can win a Chinese bailout; if an IMF deal is reached, bondholders may face writedowns.
Suriname – The economy will contract 9 percent in 2016, says the IMF, which in a recent statement criticized the South American country for backtracking on reforms required for a $500 million loan. The IMF noted Suriname had limited finances to cover essential spending, including wages and pensions. That may become a concern for holders of a $550 million bond, with first coupons due April 2017.
Belize – The central American country said last month it wanted to "amend" $530 million in 2038 bonds for its third restructuring in a decade. The bonds carry a step-up coupon that climbs from 5 percent to 6.767 percent in 2017. Talks started last week with creditors.